Sell E-Readers or E-Books? A Competitive Perspective

Posted: 9 Jan 2011 Last revised: 21 May 2015

See all articles by Xiaoying Liang

Xiaoying Liang

City University of Hong Kong - Department of Management Sciences

Lijun Ma

Shenzhen University - Department of Management Science

Houmin Yan

The Chinese University of Hong Kong (CUHK) - Department of Systems Engineering & Engineering Management

Date Written: August 20, 2014

Abstract

Motivated by observations of the e-book reader market, in this paper we consider the competition in a market composed of both integrated and unintegrated firms with vertically complementary and horizontally substitutable products. We augment the literature with an elaborate characterization of the customer decision-making process, as well as of the firm's detailed revenue structure. Using a stylized game-theoretical model, we show that the firm's strategic decisions - pricing and accessing - are closely associated with its customer characteristics. More specifically, in the pricing subgame, we find that the orders of access costs, equilibrium prices, and customer characteristics are all correlated, which is the case under both duopoly and oligopoly. This reveals strategic positions of different types of firms in the competitive market, and is of particular interest and practical value in terms of the strategic decision making for a firm.

Keywords: network effects, complements, customer characteristics, pricing, accessing

JEL Classification: C72, D43, L13

Suggested Citation

Liang, Xiaoying and Ma, Lijun and Yan, Houmin, Sell E-Readers or E-Books? A Competitive Perspective (August 20, 2014). Available at SSRN: https://ssrn.com/abstract=1736824 or http://dx.doi.org/10.2139/ssrn.1736824

Xiaoying Liang (Contact Author)

City University of Hong Kong - Department of Management Sciences ( email )

Kowloon Tong, Kowloon
Hong Kong
34428647 (Phone)

Lijun Ma

Shenzhen University - Department of Management Science ( email )

3688 Nanhai Road, Nanshan District
Shenzhen, Guangdong 518060
China

Houmin Yan

The Chinese University of Hong Kong (CUHK) - Department of Systems Engineering & Engineering Management ( email )

Shatin, New Territories
Hong Kong

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